| [s219(8)][Para 20 Sch 36] |
A pension in payment on 5 April 2006 (what the legislation
refers to as a pre-commencement pension) is only considered for
lifetime allowance purposes when (or if) a
BCE is first triggered on or after 6 April 2006 in
respect of that individual (whether under the same or a different
registered pension scheme). If no BCE occurs those
rights will never be considered for lifetime allowance purposes.
Where that pre-commencement pension is being paid from 6
April 2006 onwards as a
scheme pension, the first BCE could be triggered
due to the augmentation of that pension beyond the permitted margin
(see
RPSM11104970). But in all other
cases the first BCE will always be triggered following the
crystallisation of other pension rights held by the individual
(again, whether held under the same registered pension scheme or
not).
The way the legislation considers pre-commencement pensions
is by saying that where that first BCE is triggered on or after 6
April 2006 the amount of lifetime allowance available at that BCE
will be reduced by the crystallised value of such pensions in
payment at that time, as valued immediately before that BCE. In
other words the amount of lifetime allowance available at that BCE
is reduced as though a BCE had occurred immediately before that
first BCE, which caught the crystallised value of any
pre-commencement pensions in payment to the member at that time.
No actual BCE occurs in respect of that pre-commencement
pension (so no
chargeable amount will ever be generated by that
deemed BCE). But the legislation does ensure that the value of
those pensions in payment is taken into account when calculating
the level of available lifetime allowance at that first actual BCE.
RPSM11104900 explains this in more
detail.
The capital value of that pre-commencement pension needs to
be factored in at that first lifetime allowance test, in order to
ascertain the member’s available lifetime allowance at that
time, whether that pension is being paid from that same registered
pension scheme or not. This is something the
scheme administrator will probably want to ask the
member about before the BCE occurs (see
RPSM11103130).
RPSM11104930 shows how the capital
value of these pensions in payment should be calculated and
RPSM11104950 gives an example of how
all the above works in practice.
| Glossary ( RPSM20000000) |
